REINSURANCE

12 Months Ended

Dec. 31, 2020

Continuing Operations - Property and Casualty Insurance Business

Ceded and Assumed Reinsurance

Reinsurance is a contract by which one insurer, called the reinsurer, agrees to cover, under certain defined circumstances, a portion of the losses incurred by a primary insurer if a claim is made under a policy issued by the primary insurer. Our property and casualty insurance companies follow the industry practice of reinsuring a portion of their exposure by ceding to reinsurers a portion of the premium received and a portion of the risk under the policies written. We purchase reinsurance to reduce the net liability on individual risks to predetermined limits and to protect us against catastrophic losses, such as a hurricane or tornado. We do not engage in any reinsurance transactions classified as finite risk reinsurance.

We account for premiums, written and earned, and losses incurred net of reinsurance ceded. The ceding of insurance does not legally discharge us from primary liability under our policies, and we must pay the loss if the reinsurer fails to meet its obligation. We periodically monitor the financial condition of our reinsurers to confirm that they are financially stable. We believe that all of our reinsurers are in an acceptable financial condition and there were no reinsurance balances at December 31, 2020 for which collection is at risk that would result in a material impact on our Consolidated Financial Statements. The amount of reinsurance recoverable on paid losses totaled $28,887 and $3,883 at December 31, 2020 and 2019, respectively.

We also assume both property and casualty insurance from other insurance or reinsurance companies. Most of the business we have assumed is property insurance, with an emphasis on catastrophe coverage.

Premiums and losses and loss settlement expenses related to our ceded and assumed business are as follows:



Years Ended December 31,	2020		2019		2018
Ceded Business
Ceded premiums written	$	88,339	$	74,511	$	66,800
Ceded premiums earned	84,924		72,023		63,487
Loss and loss settlement expenses ceded	185,653		28,447		22,317

Assumed Business
Assumed premiums written	$	34,371	$	27,869	$	16,761
Assumed premiums earned	33,679		25,412		16,957
Loss and loss settlement expenses assumed	29,141		14,813		(3,954)

In 2020, we renewed our participation in all of our assumed programs. Loss and loss settlement expenses ceded increased in 2020 as compared to 2019, primarily due to the August Midwest derecho, the recovery of the all lines aggregate program and increase in severity of commercial property and workers' compensation losses.

In 2019 we added two additional assumed programs and did not renew one program from 2018. Loss and loss settlement expenses ceded increased in 2019 as compared to 2018, primarily due to an increase in severity of commercial auto losses, assumed reinsurance losses, extra contractual obligations and catastrophe losses.

In 2018, we renewed our participation in all of our assumed programs.

Refer to Note 5 "Reserves for Losses and Loss Settlement Expenses" for an analysis of changes in our overall property and casualty insurance reserves.

Reinsurance Programs and Retentions

We have several programs that provide reinsurance coverage. This reinsurance coverage limits the risk of loss that we retain by reinsuring direct risks in excess of our retention limits. The following table provides a summary of our primary reinsurance programs. Retention amounts reflect the accumulated retentions and co-participation of all layers within a program. For 2020, there was an all lines annual aggregate excess of loss program with variable retention of 6.37 percent of gross net earned premium with a minimum retention of $58.5 million and a maximum of $71.5 million. Our all lines aggregate recovery is also limited to $30.0 million and 75.0 percent of the program was placed. For 2020, the Company recovered the maximum of $22.5 million from the all lines annual aggregate excess of loss program. For 2019, there was an all lines annual aggregate excess of loss program with a variable retention of 6.66 percent of gross net earned premium with a minimum retention of $58.5 million and a maximum of $71.5 million. Our all lines aggregate recovery is also limited to a maximum of $30.0 million. For 2018, there was an all lines annual aggregate excess of loss program with a variable retention of 6.78 percent of gross net earned premium with a minimum retention of $58.5 million and a maximum of $71.5 million. Our all lines aggregate recovery is also limited to a maximum of $30.0 million. For 2019 and 2018, the Company did not have any recoveries from the all lines annual aggregate loss program.


	2020 Reinsurance Programs
Type of Reinsurance	Stated Retention		Limits		Coverage
Casualty excess of loss	$	2,500	$	60,000	100	%	of	$	57,500
Property excess of loss	2,500		25,000		100	%	of	$	22,500
Surety excess of loss	1,500		45,000		100	%	of	$	43,500
Property catastrophe, excess	20,000		250,000		100	%	of	$	230,000
Boiler and machinery	N/A		50,000		100	%	of	$	50,000


	2019 Reinsurance Programs
Type of Reinsurance	Stated Retention		Limits		Coverage
Casualty excess of loss	$	2,500	$	60,000	100	%	of	$	57,500
Property excess of loss	2,500		25,000		100	%	of	$	22,500
Surety excess of loss	1,500		45,000		100	%	of	$	43,500
Property catastrophe, excess	20,000		250,000		100	%	of	$	230,000
Boiler and machinery	N/A		50,000		100	%	of	$	50,000


	2018 Reinsurance Programs
Type of Reinsurance	Stated Retention		Limits		Coverage
Casualty excess of loss	$	2,500	$	60,000	100	%	of	$	57,500
Property excess of loss	2,500		25,000		100	%	of	$	22,500
Surety excess of loss	1,500		45,000		100	%	of	$	43,500
Property catastrophe, excess	20,000		250,000		100	%	of	$	230,000
Boiler and machinery	N/A		50,000		100	%	of	$	50,000

If we incur catastrophe losses and loss settlement expenses that exceed the coverage limits of our reinsurance program, our property catastrophe program provides one guaranteed reinstatement. In such an instance, we are required to pay the reinsurers a reinstatement premium equal to the full amount of the original premium, which will reinstate the full amount of reinsurance available under the property catastrophe program.

Discontinued Operations - Life Insurance Business

Premiums and losses and loss settlement expenses related to our ceded business are as follows:



Years Ended December 31,	2020		2019		2018
Ceded Business
Ceded insurance in-force	$	—	$	—	$	—
Ceded premiums earned	—		—		716
Loss and loss settlement expenses ceded	—		—		1,473

The ceding of insurance did not legally discharge United Life from primary liability under its policies. United Life must pay the loss if the reinsurer fails to meet its obligations. United Life periodically monitored the financial condition of their reinsurers to confirm that they were financially stable and had strong credit ratings. We believe that all of the reinsurers were in an acceptable financial condition.